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Category: Money Matters
Cryptocurrency 101
Cryptocurrency is digital money that can be sent electronically.
One prominent advantage of cryptocurrency is its value. Unlike traditional currencies issued and regulated by a central government, cryptocurrencies are much more decentralized, and are not controlled by governments. This decentralized structure, and the limited supply of Cryptos allow it to maintain its value unaffected by inflation.
Additionally, because Cryptocurrencies are secured by cryptography, it makes it nearly impossible to counterfeit or double-spend.
Types of Cryptocurrencies
There are thousands of digital currencies available globally, however Bitcoin is the most popular and valuable type. Invented in 2008 by Satoshi Nakamoto, it was made available to the public in 2009 and remains the most widely traded cryptocurrency.
Some other types of Cryptocurrencies are Solana, Litecoin, Ethereum, Cardano, and EOS.
Crypto volatility
There are several reasons for the volatility associated with Cryptocurrency, for instance in one day Bitcoin’s value dropped 30%.
Reasons for the volatility of many Cryptocurrencies include:
Emerging market
The digital currency market is still an emerging market so a group of investors holding large amounts of crypto coins can influence the market.
Speculation
The digital currency market thrives on speculation particularly because it currently commands a lot of attention, so investors can speculate that Crypto prices would go up or go down to make profit. These unsure and sometimes uninformed guesses cause an unprecedented influx of money or a sudden outgo, which leads to high volatility.
Supply & Demand
Supply and demand are determinant factors that influence the prices of commodities, and this also applies to Cryptocurrency. Most digital currencies like Bitcoin and Ether are digital assets, without any tangible commodity so their prices are determined by the laws of demand and supply.
Risk-averse Investors
Unlike other investment instruments such as equities, many people believe that trading in cryptocurrency does not require any expertise. This means that part-timers willing to get fast cash often invest in it. When the expected fast money does not come, some investors lose patience and make withdrawals. This unmonitored involvement and withdrawal also leads to volatility.
Before trading Cryptocurrencies
Decide When To Stop Trading
Checking the value of cryptocurrencies constantly is unproductive, investors should decide on a price point at which they’ll sell.
Hold For Longer
Buying and selling cryptocurrency in a dizzying circle prevents investors from seeing the bigger picture. It is advisable for investors to buy and hold for longer as this reduces the risk of missing out on profits.
Diversify
The best way to diversify should be to put only a subset of your larger investments into cryptocurrencies. Considering how unpredictable the market can get, cryptocurrencies should be treated more like volatile stocks to be entered into on a longer timeline.
What you should know about NFTs
There have been many technical definitions of NFTs however, the simple, most realistic way to describe it is to consider it a code which confers the ownership of a unique digital item.
Unlike fungible tokens like currency notes, NFTs or non-fungible tokens are unique because they possess a Token ID. This is a distinct and unique number which differentiates one digital item from another, which means that they cannot be replaced or replicated.
Since the spike in digital currencies and investment instruments like cryptocurrency and blockchain, NFTs have become an important digital tool for graphic designers, illustrators, musicians, painters, writers, and collectors.
Here’s how it works
NFTs have become quite popular within the creative sector because many creatives consider it a form of investment. If the price of an item goes up, the buyers can sell it and make a profit. Additionally, access to a global digital content market makes it possible for creators to side-step the need for a middleman, when trying to sell their art.
How do NFTs get their value?
The value of an NFT is hinged on the type of asset that it represents on the blockchain, if an NFT asset is tangible like a building, the real-life price is reflected through its NFT on the blockchain. However, if it is digital content then its value becomes purely speculative.
Buying An NFT
Get some cryptocurrency
Most NFTs are listed and priced in ether, so to buy an NFT buyers need to get some cryptocurrency.
Decide on an NFT marketplace
NFT marketplaces are of two distinct types: The Open Market, and the Closed Market. The Open Markets give free rein for anyone to join as a creator, while the Closed Markets allows only popular and invited users to register as creators.
Some examples of Open Markets are OpenSea, Rarible, Mintable, Zora, among other, while examples of the Closed Markets are Foundation, MakersPlace, SuperRare, and a handful of others.
Bid for or buy the item
Having decided on a marketplace, the next step is for the buyer or collector to make a bid for the item or purchase it.
Pay with cryptocurrency
Like every business transaction, the last step is to pay for the item. This payment is made with cryptocurrency.
Selling An NFT
These are some of the steps to begin selling NFTs:
- Create a digital wallet and get some cryptocurrency which you will need to cover the cost of creating your listing.
- Decide on an NFT Marketplace.
- Connect your wallet to the marketplace.
- Upload the digital file you want to list as an NFT
- Provide further details about the item
- Decide if you want to build in royalties.
- List the item and wait for bids
Are you covered?
The life and property of humans are prone to risks such as death, disability, and destruction. Often, these risks may result in financial losses and Insurance is an efficient way to mitigate these risks.
Insurance is a financial product sold by registered insurance companies to safeguard customers and their properties against the risk of loss, damage, or theft.
How does insurance work?
When you buy an insurance policy, you agree to periodically pay the insurer a certain amount of money known as premium. In exchange, when you make a claim, the insurer pays you back or helps to cover the loss as covered under the insurance policy.
How premiums are calculated
The cost of an insurance policy depends on the risk, which in turn reflects how likely a customer is to make a claim. The lower the risk, the lower the premium will generally be.
It also depends on the value of what a customer is insuring, so things with a higher value will cost more to repair or replace.
Lastly, premiums are also made up of relevant local, state, and central government levies and stamp duties.
Types of Insurance
There are different types of insurance policies for different types of needs. But the most common types of insurance for people are:
Health insurance
In many cases, this is gotten through an employer even though retail plans exist. It can cover doctor visits, hospital expenses, therapy sessions, and drugs prescriptions.
Life insurance
If the holder of a life insurance policy dies, their beneficiaries receive a set amount of money to make up for what they would have earned. This is available on i-invest and you can find out more here.
Homeowners insurance
This insurance can cover the home and the things inside it against theft and some weather-related damages.
Car insurance
This typically covers personal injury or car repair after an accident. In some cases, it covers damage resulting from vandalization.
Benefits of Insurance
While many people are sceptical about buying insurance policies, it is important to know that in the long run insurance policies help to provide:
- Coverage of unprecedented expenses
- A way to meet your obligations
Some governments expect some level of auto-insurance before citizens can drive their vehicles.
- Financial security for the family
Important tips about insurance
Prior to purchasing an insurance policy, here are some points which might help in your decision making.
- Lower risk equals lower premiums.
- Don’t make a lot of claims because it inflates premiums, in some cases.
- Insurance is complicated, do make sure to scrutinize the contracts so that you understand the specifics of your coverage.
Before You Sell Your Stocks
Warren Buffet, regarded as one of the world’s most influential investor, once said, “If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.” While this might seem like an extreme recommendation, many financial experts have asserted that the goal for stock investments should be to hold them for as long as possible.
The possibility of making money from stocks is hinged on two factors: buying at the right time and selling at the right time. For profit, it is important to execute both decisions correctly. Compared to selling, which is a difficult decision to make, buying of stocks is relatively easy.
The reason for this is because, if investor sell too early and the stock goes higher, they risk making inadequate profit. If they sell too late and the stock plunges, they miss out on opportunities to make more profit.
Why You Shouldn’t Sell Your Stocks.
Market downturns are great buying opportunities. On days when the stock market takes a beating, rather than mope about the loss, investors are encouraged to focus on what they could be buying. A market plunge or creates room for stocks to become cheaper.
The market is resilient. In the words of Tenpao Lee, a professor of economics at Niagara University, “In the short term, the stock market could fluctuate up and down, but in the long term, the stock market will always move up.”
When To Sell
When deciding to sell your stock, it is important to weigh the decision within two lenses: the intrinsic and extrinsic reasons. Intrinsic reasons are reasons that are related to the stock itself and/or the markets while the extrinsic reasons are related to the investor’s finances or lifestyle. Sometimes, however, the decision to sell may be triggered by a combination of the two factors.
Intrinsic Reasons
When a stock reaches your price target. Once a stock reaches a level that an investor had projected as their point to sell, then it is advisable to consider selling part, or all their position.
When a stock trades at a technical inflection point. When a stock trades near, and then breaks below a multiyear low, it often means additional losses in the horizon. In this case, it is encouraged to sell the stock as soon as the technical level is breached.
When a company’s fundamentals deteriorate. It is possible for a stock’s fundamentals to deteriorate for any number of reasons like slow earnings or revenue growth, increased competition, or reduction in valuation. In such cases, because it is difficult for the investor to determine whether the deterioration is temporary or permanent, it is advisable to sell and exit the position first, before re-evaluation.
Extrinsic Reasons to Sell
Financial reasons. One justifiable reason for an investor to sell their stocks is if they need cash to for a competing investment, such as real estate. Additionally, an investor might wish to sell a stock to book a loss for tax purposes. These financial reasons are potent ones to justify selling a stock.
Lifestyle reasons. Lifestyle changes also provide good reasons to sell a stock. For instance, a younger investor might sell part of or all their portfolio to put a down payment on a house, while parent investors may also sell stocks to finance their children’s education.
Tip
i-invest offers an array of safe and secure investment options for buying stocks, Equities, Eurobonds, among others. Click here to find out more.
Building a savings culture
Commercial Papers?
Commercial Papers (“CPs”) are short-term debt instruments issued by corporates to get funds from the public (private individuals, institutional investors, non-governmental organisations, religious bodies etc.) to meet short-term obligations. These large corporations are the main issuers of Commercial Papers because they have high credit ratings.
A CP pays a fixed interest rate to the investor. Also, it is generally sold at a discount to its face value due to the somewhat risky nature of the unsecured security. Typically, maturities on Commercial Papers rarely last longer than 270 days.
The minimum investment amount for Commercial Papers on i-invest is N50,000.
Advantages of Commercial Papers
- Low minimum investment amount – invest from as low as N50,000 and enjoy access to relatively high return on investment
- Fixed return on investment – you get to earn your interest upfront (discounted value) at the point of purchase while the invested amount (face value) is paid fully at maturity
- Duration – short to medium term investment (duration of 15-270 days)
- Low risk of default – the companies that issue commercial paper are large, creditworthy corporations and the paper often gets ratings from ratings agencies. As a result, there is a low risk of you losing your investment.
- Investment portfolio diversification – commercial papers are an effective way to diversify investment portfolio and balance higher-risk investments like stocks.
- Tax free
How do Commercial Papers work?
Commercial Papers are sold at a discount, meaning the investor pays less than the face value of the security, and the rate of return is the difference between the purchase price and face value. Companies typically write commercial paper in minimum denominations of thousands with terms ranging from 15 to 270 days, though the average maturity on commercial paper is around 30 days.
While commercial papers in Nigeria are typically issued by corporates with remarkable credit ratings, this does not eliminate credit risk. However, commercial paper offers investors the opportunity to purchase better yielding instruments than available on risk-free instruments, especially investors who can take calculated risk.
How to Buy Commercial Papers?
- Download the i-invest app on the App Store or Google Play Store or sign up on this website.
- Register with your BVN, phone number and a valid email address.
- Fund your wallet via internet banking, card or in a bank branch. Wallet withdrawals can be made directly into an account linked to your BVN.
- Select your preferred investment option and watch your money work for you!
- Be sure to upload a passport photograph, recent utility bill and a valid means of identification for KYC verification.
How much can I start investing with?
Fixed Deposit Notes
Fixed deposit Notes sometimes known as a term deposits are investment instruments which are provided by financial institutions, which allows you to invest a certain sum of money for a fixed period at a predetermined interest rate until the specified maturity date.
Fixed Deposits offer higher interest rates than the regular savings accounts. This is an ideal investment option for you and/or your business, if you have a lump-sum amount that is not required for immediate use and you are averse to taking high risks, as the returns are not subject to market risks and offer a fixed rate of interest throughout the tenure.
Minimum investment is N100,000, and withholding tax is deductible from accrued interest.
Advantages of Fixed Deposit Note
Fixed deposits have several advantages, some of which are:
- Low risk – Market risks do not affect the returns on your fixed deposits.
- Higher Interest – Earn high interest on your deposits than your regular savings account and let your money work for you.
- Fixed Interest Rate – No matter how interest rates move or economy performs, you will get the returns fixed at the time of investing.
- Assured Return – Unlike market-linked securities that may result in losses due to market volatility, fixed deposits provide an assured rate of return on investments. Your capital remains intact.
How does it work
When you invest in Fixed deposits, the financial institution guarantees to return the invested sum at the end of the tenure, known as the maturity period, and pays you interest for it.
The interest offered depends on the tenure or maturity period of the Fixed deposits. A 30-day fixed deposit will have a lower annual interest rate compared to a one-year tenure. This is to compensate for the time value of money.
How Can I Buy Fixed Deposit Notes?
- Download the i-invest app on the App Store or Google Play Store or sign up on this website.
- Register with your BVN, phone number and a valid email address.
- Fund your wallet via internet banking, card or in a bank branch. Wallet withdrawals can be made directly into an account linked to your BVN.
- Select your preferred investment option and watch your money work for you!
- Be sure to upload a passport photograph, recent utility bill and a valid means of identification for KYC verification .
What is an equity
What are Equities?
An equity investment is money that is invested in a company by purchasing shares of that company in the stock market. These shares are typically traded on the stock exchange. The equities product on the i-invest app allows you to buy and sell shares in publicly listed companies on the Nigerian stock exchange directly from your phone.
What you should know
- Orders placed for shares are filled based on market availability and are matched at the prevailing market price as at the time of the order.
- Dividends earned from shareholdings are determined by the company and will be paid into the investor’s registered bank account.
- The Nigerian Stock Exchange trading hours are between 10am and 2:30pm.
- The i-invest equities service is provided by PSL Capital Limited. PSL Capital is a registered member of the Nigerian Stock Exchange.
Why should you consider Equities?
Equity investors purchase shares of a company with the expectation that they’ll rise in value in the form of capital gains, and/or generate capital dividends. If an equity investment rises in value, the investor would receive the monetary difference if they sold their shares, or if the company’s assets are liquidated and all its obligations are met. Equities can strengthen a portfolio’s asset allocation by adding diversification.
Potential benefits of Equity Investments
- The main benefit from an equity investment is the possibility to increase the value of the principal amount invested. This comes in the form of capital gains and dividends.
- Investors may also be able to increase investment through rights shares, should a company wish to raise additional capital in equity markets.
How do I buy a slice of my favourite company?
- Download the i-invest app on the App Store or Google Play Store.
- Register with your BVN, phone number and a valid email address.
- Provide a passport photograph, recent utility bill and a valid means of identification for KYC upload.
- Once KYC is updated, a trading account will be opened for you.
- Fund your wallet via debit card or internet banking.
- Click on Invest on the app and select ‘Equities’.
- Select a stock from the list of stocks displayed.
- Enter the volume of stock you would like to purchase.
- Click ‘Proceed’, a transaction summary page will be displayed for review. To proceed, click ‘Complete purchase’ to conclude your purchase.